SchifferLine 1 November 2014

Timely Real Estate News…………………….1 November 2014

***************************************************************The national housing market rose to its highest level It’s been a season of mixed messages as we are witnessing, again, the real estate market suffering from a personality disorder. One story has “happy face” written all over it. The next day, it’s “sad face”. So let’s start with Mister Happy: The national housing market rebounded in September as home sales rose to their highest level of the year. After dipping in August, sales of previously owned homes climbed 2.4% in September to a seasonally adjusted annual rate of 5.17 million, the National Assn. of Realtors said last Tuesday. Analysts polled by Fact Set expected an annual rate of 5.1 million.

What we do know is that low mortgage rates, coupled with restrained price increases, boosted sales last month. The Realtors group said. “Traditional buyers are entering a less competitive market with fewer investors searching for available homes,” the trade group’s chief economist, Lawrence Yun, said. They’re also discovering falling interest rates as worries over the global economy grow and investors rush into U.S. Treasury bonds.

Depending on the loan amount, the average rate for a 30-year fixed mortgage dropped below 4% during the week of October 20, according to mortgage giant Freddie Mac. “Those declines may spur even more buyers to aggressively search for a home,” said Quicken Loans Vice President Bill Banfield. “This can give a boost to existing sales in the coming months, even if these levels are short-lived,” he said.

Still, U.S. sales in September were 1.7% below a year earlier, indicating that a purchase for some buyers remains difficult after prices climbed much faster than incomes in 2013. Compared with August, sales rose in all regions except the Midwest, where they fell 5.6%. In the West, sales increased 7.1%. I am still dealing with multiple offers in the mid to high $1.5 range where my clients are losing out to multiple offers on properties that continue to be sold over asking price, at times over $100,000!

******Housing prices stall….state recovery is “on hold” OK, now Mister Sad Face: A key measure of home prices out last week suggests the California housing recovery has stalled, at least for now. According to the national real estate tracker — Case-Shiller Index Prices in the Los Angeles area were flat in August. They fell in San Francisco and San Diego as well.

Across the 20 major cities Case-Shiller tracks, they grew two-tenths of a percent, a pace slower than analysts expected. The declines were steeper if seasonal adjustments are taken into account, though some economists say those have become less reliable as home-buying patterns have shifted. While prices are still climbing on a year-over-year basis — up 6.8% in Los Angeles — the numbers reflect a market that is plateauing as credit remains tight, home buyers back away from new, higher price points and sellers begin to lower their expectations.

It may not be a bad thing for the market to stop and catch its breath, economists say. Home prices, especially in coastal California markets, have returned to levels that are unaffordable for most households, and a slowdown in prices, coupled with stronger job and income growth, could give more would-be buyers time to catch up. Still, prices in California remain 18% below their peak in 2006, leaving some homeowners holding little or no equity in their homes.

The slowdown in price growth is beginning to have an impact on the market. The number of homes sold in the six-county Southland grew in September 2014 for the first time in a year.

So, let me give you my “spin” on what is going on. There are many moving parts in the real estate industry — prices, sales volume, mortgage financing, interest rates, credit, and inventory. All of these are in “play” every day in our business. We are used to seeing fluctuations in all of these key indicators that will affect any person’s personal real estate investment — whether they are an “investor” or home owner or buyer — one has to keep an “eye on” all of these elements to determine their decisions affecting their real estate investments.

What has been the trend, however, is not all of them are always in the “positive” — some months, prices are rising, sales are slowing, or interest rates are dropping (or rising), and inventory is coming back to ‘normal levels’. And what is normal? Today is normal, because, well, that’s what today is. It’s not good enough to say that we’re in an abnormal period if this becomes our “daily diet” of real estate news. We endure the ups and downs like any industry.

Overall, we are seeing a healthy trend with moderating housing prices along with increased inventories on the Westside. But yes, California’s business climate affects all of us, and as UCLA Anderson’s forecast pointed out in September, we’re not going to see major gains in California until the end of next year. But on the Westside, we’re blessed with a wonderful market and a resilient, solid foundation of well-planned communities, incredible cultural assets and a world-class collection of neighborhoods. So….I have my Happy Face on. So should you!

****** What’s in your wallet Freddie? Mortgage rates sank…. We all know that the government has a big wallet. The question is: How much does it cost to let Freddie and Fannie open it and lend us a few bucks? The lowest mortgage rates of the year sank a bit lower this week, with Freddie Mac reporting that lenders were offering 30-year fixed loans at an average of 3.92%, down from 3.97% a week ago.

The average rate for a 15-year loan also ratcheted down, from 3.18% to 3.1%, according to Freddie Mac’s weekly survey, offering borrowers an inexpensive way to pay their mortgages faster.

With inflation running below the Federal Reserve’s target of 2% and consumer prices up just 0.1% in September, investors are accepting rock-bottom returns on mortgage bonds guaranteed by Freddie Mac and Fannie Mae, the housing finance giants. The average rate on the 30-year fixed mortgage was at its lowest point since June 2013, Freddie Mac said in its weekly report issued last Thursday. A year ago at this time, borrowers were offering 30-year loans at an average of 4.13%.

Freddie Mac asks lenders every Monday through Wednesday about the terms they are offering to low-risk borrowers who pay minimal points and fees to lenders — half of 1% of the loan amount in the latest survey.

******Here’s more good news for borrowers….easing up on demands, maybe Freddie and Fannie aren’t all bad. We may have some good news about mortgage approvals for borrowers. Hoping to boost mortgage approvals for more borrowers, the federal regulator of Fannie Mae and Freddie Mac told lenders that the home financing giants would ease up on demands that banks buy back loans that go delinquent.

Addressing a lending conference last week, Melvin Watt, director of the Federal Housing Finance Agency, outlined ways in which his agency would clarify actions it takes against bankers on loans that go bad after being sold to Freddie and Fannie. The agency’s idea is to foster an environment in which lenders would fund mortgages to a wider group of borrowers, particularly first-time home buyers and those without conventional pay records.

However, many of the attendees left un-impressed. Many said that Watt’s message lacked specifics and did little to reassure mortgage lenders that the nation’s housing market would soon be back on track. “The speech was horribly disappointing,” said Jeff Lazerson, a mortgage broker from Orange County, CA, calling Watt’s delivery and message “robotic.” “They’ve been teasing us, hinting that things were going to get better, but nothing new came out,” Lazerson said. “A lot of good loans don’t get done because of silly regulations that are not necessary.”

Stuart Gabriel, director of the Ziman Center for Real Estate at UCLA, said he’s of a “mixed mind” about the changes. On

one hand, Gabriel said, tight underwriting rules are clearly making it harder for many would-be buyers to get a loan, perhaps harder than it should be. “If they loosen the rules a bit, they’ll see more qualified applicants and more applicants getting into mortgages,” he said. “That would be a good thing. But, he said, a down payment of just 3% doesn’t leave borrowers with much of a cushion. If prices fall, he said, it risks a repeat of what happened before the downturn.”

Still many acknowledged that Freddie and Fannie have recovered billions of dollars from banks that misrepresented borrowers’ finances and home values when they sold loans during the housing boom. The settlements have, indeed, helped Freddie and Fannie, which were taken over by the government in 2008, and led many bankers to clamp down on new loans. Hence, that’s where we are today.

So the big question is: Will the changes really provide an uptick in loan approvals or will this be just another government agency putting on a “Happy Face” over a sad one? We’ll see.

******Halloween is no laughing matter anymore….an $8 billion “treat” One can’t help driving around and seeing the remarkable ingenuity and creativity of the Halloween displays that now take up entire homes, and neighborhoods. It has become an $8 billion celebration, making Halloween the 2nd largest retail holiday, just behind the Christmas season. I have noticed quite an increase in the number of tombstones and cemeteries, draping cobwebs, dangling ghosts from trees, scarecrows, and jack-o-lanterns on front porches. My next door neighbor hasn’t missed a “trick” as his entire 70′ driveway is now Pumpkin Drive lit up with all sorts of Halloween decor including the scary voices that appear out of nowhere (and you should see his Christmas display.. it is awesome!),. I mean, it’s amazing to see how we Americans are now celebrating what was rather subdued when I grew up. “Trick or Treat” remains the theme every year, doesn’t it? Even a bear got into the act.. Check out the YouTube video of a bear making himself at home on a front porch of a house in La Canada and doing his own personal carving job on a pumpkin! It was really quite something to see! The homeowner decided to keep it that way. There was a recent survey that was done asking “at what age do you think people should stop going Trick or Treat? Any clue as to what that age was???? 18… What are your thoughts? Please let me know.. carole@caroleschiffer.com.. I would love to hear from you!

According to the National Retail Federation, the top costumes for this year: Disney’s Frozen and Teenage Mutant Ninja Turtle costumes for kids. Adults, thank God, have opted for more traditional options such as witches, animals or Batman characters. And let’s not forget the dogs and cats! This last Halloween (last Friday) was still traditional in that I was visited by some of the spookiest, most fun kids who, like me when I was younger, enjoyed a night of pure fun and I hope the kids did not have too much of a sugar high!. Happy Belated Halloween. BOO!

******Getting on the soap box

The tricks and the treats continue to come in the real estate world also. As I mentioned earlier, the highs of a prospective buyer making an offer on a particular property are sometimes negated by the loss of another buyer or two that comes in higher and pushes us out of contention. It is so painful to see, particularly when some of my clients are really stretching to get to that price. The one bit of advice is to really listen to your gut and if it says GO, then GO NOW, because sitting around can cost you that house.. there are still a good amount of buyers out there, and if you wait, they will “sneak in” and push you out.. Particularly if you are at the top of your price range, every sale pushes that bar higher and then, and I have seen this happen time after time.. you as the potential buyer are left holding the bag and wondering what happened.. and when it happens more than once, as it most likely will.. the buyer gets discouraged and goes away… Something for obvious reasons, I really hate to see happen…Please let me know how I might assist you with any and all of your real estate needs.